Nearshoring heads list of small, midsize businesses supply chain trends

Small and midsize businesses (SMBs) are taking drastic action to optimize and innovate their supply chains.

A majority (88%) of SMBs plan to or are currently switching at least some of their suppliers closer to the U.S. in 2023, according to a study by software review and selection platform Capterra, which surveyed 300 U.S. SMB supply chain professionals. The move comes as the companies deal with economic headwinds, operational bottlenecks and an ongoing need to remain competitive.

“While industry experts predicted nearshoring to happen slowly over the course of several years, SMBs have already or are making a rapid shift to nearby suppliers,” the study said.

In addition to nearshoring, the report also revealed four other trends shaping the future of SMB supply chains. The trends are listed below:

A strained economy and low inventory are top stressors for SMBs. 

SMB supply chain professionals rate economic inflation (65%), the lack of inventory (45%), and the economic recession (42%) among their top three concerns going into 2023.

SMBs are disproportionately impacted by these challenges compared to larger companies with more resources to absorb rising costs and who have more buying power in the procurement process.

Software-based emerging tech is on the rise while hardware tech lags behind.

Small business supply chains are investing in software-based emerging tech at twice the rate of hardware-based ones.

The top three emerging tech adopted by SMB supply chains are IoT (42%), blockchain/smart contracts (41%), and artificial intelligence (39%).

Seasonal forecasting is reducing excess inventory concerns.

While major retailers have been dealing with an influx of excess inventory, 67% of SMBs say their forecasting techniques have helped them avoid this same fate.

Both seasonal and quantitative forecasting techniques are among the most commonly used by SMB supply chain professionals in 2022 and going into 2023.

More SMBs are leveraging cooperative procurement to increase buying power.

Either by working directly with each other to place larger orders or with their supplier who then has greater purchasing power, the number of SMBs in a group purchasing organization (GPO) has more than doubled in just the last year. Nearly two-thirds (64%) of SMB supply chains have joined or plan to join a GPO to help manage procurement costs and challenges.

“The biggest surprise in the research is that nearshoring is happening much faster than predicted at small businesses,” said  Olivia Montgomery, associate principal supply chain analyst at Capterra. “What’s less surprising, but equally critical, is the shift we’re seeing toward collaborative procurement. Supply chains are becoming less of a back-of-the-house ‘secret recipe’ and more like a joint collective where everyone benefits.”

Read the full trends report here.